Finding Hidden Value in Your Indirect Spend
MAPI recently conducted an in-depth survey (Finding the Hidden Value in Your Indirect Spend) on what companies are doing with respect to their management of indirect spend—that is, that part of the company’s expenditures for items, resources, and labor that is not directly tied to the production of a company’s products. Examples of indirect spend categories include travel, MRO (maintenance, repair, and operation), logistics, HR services, marketing, consulting, and legal services. The survey’s 73 participants included members of the CFO, Financial, and Purchasing Councils.
The survey found that the awareness of the importance of indirect spend is high but that the maturity levels of indirect spend programs vary. Although most companies have a centralized or center-led approach to strategic sourcing, most firms (60%) utilize procurement to strategically source only selected spend categories. Another 18% employ procurement on an ad hoc project sourcing basis. Despite the value that can be captured by strategically sourcing the indirect spend, the survey found that barriers to capturing this value remain significant.
The survey addressed a number of questions, including: 1) who has the lead responsibility for the management of indirect spend; 2) the structure of the indirect procurement organization for strategic sourcing; 3) the number of procurement employees dedicated to the managing the indirect spend; 4) corporate goals other than cost reduction supported by the indirect spend program; 5) the categories companies include in their indirect spend program; and 6) the extent to which various factors impact a company’s ability to effectively manage its indirect spend.